May 2, 2022
As per Statista, the food and beverages industry was worth USD 281.14 billion globally in 2021. It is projected to grow at a 9.5 percent CAGR and cross 500 billion by 2028.
The food and beverages industry is much different from several other run-of-the-mill industries. Here, people become entrepreneurs primarily because they love food and the idea of serving the community of people like them. Even the most dynamic leaders are forced to focus on finding the right balance of growth, cost, and performance optimization due to its highly controlled and consumer-facing landscape. In addition, it is heavily consumer-dependent, i.e., they have to ensure that they remain proactive and adjust to changes in consumer preferences. Therefore, while some may treat it as a threat, others see it as an opportunity to scale and improve their customer satisfaction quotient, which is undoubtedly their business’ biggest driver.
The pre-COVID era focused on getting the lighting and the ambiance right, attaining the perfect menu, and finding the right people who could augment the overall ‘dining experience.’ Chefs further contributed towards creating the ultimate experience while others focused on a pleasant guest experience.
All of it not only came to a halt, but things also took a different path once the pandemic lay foot. The traditional ideas became stale within minutes, with restaurants closed for the public to prevent the spread. While customer experience remained the priority, the move propelled the food and beverages industry players, irrespective of their size, to change their approach and fully embrace digital transformation as the new normal.
One of the emergency actions that became widespread was the shift of the data from primarily offline to being largely cloud-based, which even continued after the initial scare subsided and people accepted the pandemic as it came.
As per Gartner’s report, public cloud services would increase by 16% in 2022 to stand at USD 400 billion by the end of the year. It has grown around 50% since 2020, when the pandemic started.
While this may seem like a one-off or mere numbers game to many, when you delve deeper, you realize that the change caused by COVID-19 and what follows in the next three years is far more significant than what we achieved in the last twenty years during the pre-pandemic era.
The world saw massive advancements in connectivity, with 5G setting foot in many countries. Some countries have even started the trials for 6G, while half of the world is yet to inculcate 5G full-fledged. But the advancement led to the creation of 44 zettabytes of data alone in 2020, which would reach 3.5x by 2025.
The numbers and trends signify that the world is fast moving towards unified cloud adoption and AI to simplify data and churn out meaningful results from cloud-based data. It also put forth the need to let go of the legacy ERP systems and adopt those that seamlessly integrate with their cloud-first approach.
A final move away from the legacy ERP systems
F&B industry, for decades, has invested in outdated and redundant legacy ERP systems that were heavy on the infrastructure but contributed little to the actual cause. It created a technical debt that most players in the industry found different to get rid of and were somehow okay with continuing with the same, as they had already invested a sizeable amount and resources.
An IDC report states that only a handful of manufacturers in the food and beverages space accepted that they were using the ERP system the way they had intended. In addition, a majority of companies were stuck in an ERP technical debt with heavily customized systems that were causing massive hindrances in the way they wanted to operate.
But with the trailblazing occurrences in the last two years, the food industry is experiencing a digital transformation, and ERP is shifting too. As a result, the industry players shifted their focus on finding and adopting more innovative and responsive ERP solutions that could shape the future of business enterprises as a whole. It would require more data and the adoption of applications to deduce business needs with greater accuracy and drive business processes to deliver better outcomes.
With ERP being vital for the overall existence of the F&B industry, brands have started investing in cloud ERPs. While each business comes with its set of challenges, a hybrid cloud approach could be the way forward for most of them. The shift from cloud-first to cloud-all is driving digital transformation across industries, and food and beverages are an integral part of it. Today, F&B leaders are no longer considering whether they should make a switch to the cloud. They are more focused on finding an exemplary cloud service to partner with.
Using the cloud to accelerate digital transformation
Only one in seven companies that have launched digital transformation has been able to sustain and experience significant performance improvements. A primary reason behind it is the inconsistent technology execution capabilities in play, and brittle infrastructures crumble when you demand meaningful analytics from them. It results in the digital transformation journey being slow and constantly bogged down by unwanted bottlenecks.
F&B leaders have begun realizing that the cloud could potentially solve a plethora of these issues. But it would require CIOs and CTOs to focus on the following –
Finding cloud-based solutions that could improve revenues and margins
The food and beverages industry is a dynamic one that requires agile and innovative solutions capable of withstanding and adapting to changes. Before the pandemic happened, the food industry was already taking baby steps to build a healthier and more sustainable ecosystem focusing on sustainability and personalization.
But with supply chains getting deeply affected because of the coronavirus and customer demands seeing a significant shift in demand, the industry was forced to think of solutions that could mingle their needs with the customer demand-based solutions.
It propelled 73% of brands in this industry to increase their digital technologies investment. Supply chain operations, data collection, and improved business analytics were the primary use cases in focus while the organizations moved towards a new tomorrow.
Brands like Keventers shifted from providing a handful of milkshakes and other desserts to offering a full-fledged list of staple items, such as full-fat milk, bread, and more. The sudden shift is not feasible unless there is a system to back it up. Adopting modern cloud solutions enables brands to add newer capabilities up to 40% faster and better chance of succeeding. In addition, these also allow effortless scalability, which opens up new avenues to help reduce costs, thereby improving margins and profitability.
The reliance on hybrid clouds will continue for the time being
Even though F&B brands are spending millions for cloud transformation, it is vital to remember that a significant chunk of data remains on-premise. The businesses are still reluctant to switch to a complete off-premise solution just yet. Gartner expects that three-fifths of the total midsize enterprise data will continue to remain on-premise three years from now.
Given that we have been so used to and comfortable using on-premise solutions, it would be easy to comprehend that a complete virtual solution is still light-years away. While the pandemic supercharged the shift, the shift from on-premise to the cloud will have several halts and will take years to happen, if it is a viable solution at all. As of now, it is not.
While the cloud promises real-time data availability, several organizations have realized that the complete picture is not available in near real-time, let alone real-time. It has propelled them to realize that the benefits of shifting to a comprehensive on-cloud strategy may not be the most technically correct answer to their data-related woos.
Instead, they will need a hybrid approach to make it work. It is also imperative for us to realize that it would be difficult for us to track back once we have adopted an all-cloud strategy. So, it is safe to say that the reliance on the hybrid cloud will remain the central theme for the time being, and the shift to the cloud will happen, albeit at a much higher pace than before.
Selecting a model that aligns with your constraints
While embarking on digital transformation, it is easy for you to get lost in a plethora of products and their extravagant marketing tactics. Given the stringent norms around food traceability, food protection, and food safety regulations, it becomes vital for you to choose the right proponent of growth. Getting a cloud solution that doesn’t contribute to your existing hierarchy can be detrimental and increase the risk of running into unwanted hassles and security loopholes.
So, it is imperative for leaders in the F&B space to figure out the right cloud solutions and whether to procure it as a SaaS (Software-as-a-Service) offering or build one of your own based on IaaS (infrastructure-as-a-Service) or PaaS (Platform-as-a-Service). For this, the top management must clearly understand their needs and constraints.
For example, a significant chunk of large companies uses proprietary data centers to route their cloud traffic. Unfortunately, it leads to an additional 10% to 20% outflow in terms of hosting cost and increases latency, leading to a sub-par user experience. It also requires you to deploy native networking and security tooling for improved security measures. But these are useful in some specific use cases, and only 20% of organizations are expected to use this for their organization.
Similarly, only 20% of the companies opt for zero-trust applications that run without a network perimeter. It allows a holistic balance of cost optimization with protection against the most common attack types. But these do not offer the leeway required to develop sophisticated applications, which can act as a bottleneck for some organizations.
So there is a need to understand that there is no one-size-fits-all concept for cloud adoption. Instead, it is vital for you to understand your brand's constraints and find a solution that best caters to their needs.
Adopt a non-binary cloud strategy
One of the biggest gripes or fears of companies shifting from traditional legacy systems to cloud-based digital transformation is that they will lose the granular control on organizational data they previously had. In addition, those in the F&B landscape are also sceptical of paying for the virtual space they did not use or running into several infrastructure management issues.
That is where a non-binary cloud strategy comes in. With its help, you can make the most of what the cloud has on offer and use additional on-premise and edge solutions to enable you to undertake seamless digital transformation. Modern cloud hosting providers offer flexibility regarding the types of clouds and cloud-based services you need and pay for only what you use.
Transform your operating models to capture the benefits cloud has on offer
While the food and beverages industry is en route to a revolution path, bringing your existing operational assets is imperative. You cannot merely dispose of your current systems unless they are redundant and cannot be used in any form. But for them to be usable, you will have to make necessary amendments.
For this, you will have to figure out ways to get rid of technical debt hindering your organization's growth. Modern leaders in the food and beverages space will focus on developer experience. They embark on redesigning the existing processes and inculcating cloud-native practices to augment the overall experience. It requires them to harness modern tools and apply developer journeys to workflows to improve traction and gain sustainable velocity.
Further, there is a need to be agile everywhere. From deciding your cloud kitchen strategy to adopting cloud for your day-to-day operations, you will have to ensure continual integration with a layered approach to ensure changes are applied with agility and have limited dependency on other applications and workloads.
Online ordering and delivery services have grown 3x compared to dine-in since 2014. The pandemic also led to the rise in delivery and cloud kitchen concepts, which were new but required seamless integration. Having a sustainable cloud strategy would bode well for brands looking to integrate new verticals and optimize the existing processes in their value chain.
While you transform your legacy models, it is also vital for you to build a culture based on agility and adaptability. Organizations must train every IT-related workforce member to optimize their cloud usage and deliver superior results. In the old days, companies often outsource development activities about their IT systems. Still, with the cloud being pervasive, they need to ensure that the workforce is well-trained to manage the system with ease.
Remember that digital cloud transformation is the journey and not the result alone
The pandemic has reshaped the F&B industry. From cloud kitchens to QSRs, we have seen the growth of verticals very few anticipated before. Given that these solutions are data-heavy and will only grow in stature, it is vital to understand that your data requirements will increase several times in the coming months. While it is inadvertent that you will run into a plethora of bottlenecks while embarking on digital transformation based on the cloud and its capabilities, you need to be proactive and calculated in your approach and execution.
For this, you will have to plan for scaling your resources granularly. It means that instead of going all-in at once and implementing cloud throughout the organization at once, you can create a tailor-made process that is more conducive to change and allows your workforce enough leeway to adjust to the changes in their day-to-day operations.
To achieve optimum results, you will have to move beyond four traditional ‘v’s – variety, volume, velocity, and veracity, and focus on creating and imparting value with everything you do. The modern organization will not survive by capturing data in its simplest form but will require more than that, and those who learn fast will stand to gain the most.
As the food and beverages landscape get used to digital transformation, SaaS solutions like Infor CloudSuite for Food & Beverages would be a key enabler in moving forward. The benefits of adopting an off-premise solution are many, but it would be wise to take it a step at a time and be cautious with the organizational decision-making. But there is no iota of doubt when we say that these changes will soon become a necessity.
About The Author
Joher Aurangabadwala is a Global Practice Director with over 20+ years of experience across multiple industries such as Consumer Goods, Food and Beverages, Automotive, Medical Devices. He has been instrumental in leading global teams to help customers realize value from Infor solutions and delivered many successful deployments across the globe.
His experience is founded on sales, procurement, and finance as a practitioner. He has experience across a wide range of leadership roles, from running operations across the US and APAC for Infor practice at Birlasoft to setting up solution cell. In his recent role, he has been instrumental in helping customers with digital Transformation and cloud journey.
Enterprise to the Power of DigitalTM
Birlasoft combines the power of domain, enterprise, and digital technologies to reimagine business processes for customers and their ecosystem. Its consultative and design thinking approach makes societies more productive by helping customers run businesses. As part of the multibillion-dollar diversified CK Birla Group, Birlasoft with its 12,000+ professionals, is committed to continuing the Group’s 160-year heritage of building sustainable communities.